Lisa Otani +852 2800 8871 lisa.otani@jpmorgan.com *SALES COMMENTARY* A lot of incoming today on what's driving Pop Mart's significant sell-off today (-10.6% on 3x ADV at time of writing), below the psychological HK$250/$230 level to a 4-month low. This is despite a massive 3Q Sales beat on Tues after-mkt (here/here). The sell-off started overnight with US ADR (PMRTY) down -10% on 6x ADV. It's also likely driving down Sanrio in Japan today (- 3.1%) in relation, alongside other "New Consumption" names: Bloks ...

Investment Rating - The report indicates a positive outlook for Alibaba Group, particularly with the return of Jack Ma and the company's strategic focus on artificial intelligence and e-commerce [4][6][17]. Core Insights - Jack Ma's return is seen as a signal of renewed confidence in the Chinese tech industry, which has been under regulatory scrutiny [6][8]. - Alibaba is investing heavily in artificial intelligence, with a commitment to spend over 380 billion RMB (approximately 53 billion USD) in the next three years [17]. - The company is also focusing on regaining market share in e-commerce, where it has faced increased competition from rivals like JD.com and Meituan [7][18]. Summary by Sections Company Leadership and Strategy - Jack Ma's influence is becoming more visible as he engages with Alibaba's leadership, particularly in AI and e-commerce strategies [5][17]. - The leadership team includes long-time associates of Ma, such as Daniel Zhang and Joe Tsai, who are expected to help steer the company back to its former glory [16][20]. Market Position and Competition - Alibaba's market share in the food delivery sector is currently at 43%, trailing behind Meituan's 47% [7]. - The company is facing a challenging environment with intense competition and changing consumer expectations for faster delivery times [7][18]. Financial Performance - Alibaba's cloud revenue saw a 26% increase, marking the fastest quarterly growth in years, which has positively impacted its stock price [17]. - Despite the positive growth in cloud services, Alibaba's overall market capitalization remains below its peak, indicating ongoing challenges [17].

Investment Rating - The report downgrades the investment rating of Pop Mart to Neutral from Overweight, with a price target (PT) of HK$300, down from HK$400 [1][3][9]. Core Insights - The long-term investment thesis for Pop Mart remains intact, supported by its strong brand equity and sales momentum, despite recent challenges such as declining Google search interest and resale prices [1][9]. - The report highlights that the share price has increased significantly, with a 209% year-to-date rise and a 466% increase over the past year, leading to a valuation that is considered priced for perfection [1][9]. - Upcoming catalysts, including the release of new animation and product launches, have low visibility, which may impact future performance [1][9]. Summary by Sections Investment Thesis - Pop Mart is a leader in China's IP merchandise market, with a diverse portfolio of over 100 owned and licensed IPs, 571 retail stores, and 2,577 roboshops across more than 30 countries [9][10]. - The company is expected to benefit from its proven capability in sourcing and monetizing IP through social media, a diversified IP portfolio, and significant global exposure [9][10]. Financial Estimates - Revenue is projected to grow from Rmb13,038 million in FY24 to Rmb49,559 million in FY27, with a year-on-year growth rate of 106.9% in FY24 and 20.1% in FY27 [8][25]. - Adjusted net income is expected to rise from Rmb3,220 million in FY25 to Rmb17,890 million in FY27, reflecting a compound annual growth rate (CAGR) of 34% [8][25]. Valuation - The price target of HK$300 is derived using a PEG ratio of 1.1x, which is a 40% discount to the market-cap weighted average PEG of comparable companies [10]. - The report indicates that the current valuation reflects a 25x P/E for 2026 estimates, suggesting that the stock is fairly valued given its growth prospects [10].

Investment Rating - The report assigns a Neutral rating to Pop Mart with a 12-month price target of HK$260, indicating a downside potential of 7.4% from the current price of HK$280.80 [17][18]. Core Insights - Pop Mart reported a significant year-on-year revenue growth of 204% and a net profit increase of 396% for the first half of 2025, surpassing Goldman Sachs estimates by 1% and 10% respectively [1][4]. - The strong performance was driven by robust sales growth in both domestic (135% YoY) and overseas markets (440% YoY), with the overseas sales mix increasing to 40.3% from 22.7% in the previous year [2][10]. - The company's core operating profit margin (OPM) expanded by 17 percentage points year-on-year to 42%, attributed to a higher gross profit margin (GPM) and strong operational leverage [2][12]. Summary by Sections Financial Performance - Total sales reached Rmb 13,876 million in 1H25, slightly above Goldman Sachs estimates [4][16]. - Net income attributable to equity holders was Rmb 4,574 million, exceeding estimates by 10% [14][16]. - The gross profit margin was reported at 70.3%, above the expected 69.4% [13][16]. Sales Breakdown - Sales in the PRC increased by 135% YoY to Rmb 8,283 million, while overseas sales surged by 440% YoY to Rmb 5,593 million [10][11]. - Proprietary products sales grew by 214% YoY, with the Monsters IP sales increasing by 668% YoY to Rmb 4.8 billion, representing 35% of total sales [11][12]. Market Expansion - The number of retail stores in the PRC increased to 443, while overseas stores reached 128, with significant growth in the Americas [13][10]. - The company plans to continue expanding its store count, with guidance for over 100 new stores for the full year [3][10]. Future Outlook - The report emphasizes the importance of management's guidance update and strategies for IP portfolio expansion during the upcoming earnings meeting [2][3]. - Continued strong growth visibility into the second half of 2025 is expected, supported by the popularity of IPs and customer base expansion [2][3].

Investment Rating - The report maintains a Neutral rating for Cisco (CSCO) following its earnings report, with a downgrade to Neutral from a previous rating due to a significant miss in adjusted EBITDA and a below-expectations guidance [3][7]. Core Insights - Cisco's earnings report showed solid results but lacked significant surprises, leading to debates on whether it is a core long-term investment or likely to consolidate due to a lack of upward revisions [3][6]. - There are positive indicators for Cisco, including strong demand for WiFi 7 orders and a potential upgrade cycle for its enterprise campus products, which could provide tailwinds in the future [4][5]. - Investor sentiment around Nvidia (NVDA) remains high, with a notable increase in stock price since April, but recent performance has raised questions about its relative value and market positioning [12][13]. - The software sector is experiencing a cautious sentiment, with many stocks showing signs of being oversold, leading to frustration and confusion among investors regarding the lack of price support despite solid earnings [14][16][17]. - Apple (AAPL) has outperformed the Nasdaq 100 index recently, but September is historically a challenging month for the stock, raising concerns about future performance [19][20]. Summary by Sections Cisco (CSCO) - Cisco's Q4 EPS beat expectations by only 1%, the smallest percentage beat since April 2022, leading to discussions about its long-term viability as a core holding [3][6]. - The company is seeing early demand signals for campus refreshes, particularly with WiFi 7 orders increasing significantly [4][5]. - Security revenue growth was slightly below consensus, raising concerns about Cisco's ability to meet its previous outlook for security and observability [6][7]. Nvidia (NVDA) - Nvidia's stock has increased approximately 100% since April, but recent performance has lagged behind semiconductor indices, prompting discussions about its valuation [12][13]. - Investor confidence in the AI theme remains high, but there are tactical discussions about risk-reward dynamics ahead of upcoming earnings [12][19]. Software Sector - The software sector is currently viewed with caution, with many stocks experiencing significant declines and showing oversold conditions [14][16]. - There is a mix of sentiment among investors, ranging from frustration to optimism about potential opportunities in the sector [17][18]. Apple (AAPL) - Apple has recently outperformed the Nasdaq 100, but the upcoming September period is traditionally challenging for the stock, which could impact future performance [19][20]. Size Factor - The report highlights significant movements in the size factor, indicating notable volatility between small and large-cap stocks, marking one of the largest shifts in the past five years [21][22].

Investment Rating - The report maintains a "Buy" rating on CATL's A-Shares and downgrades H-Shares to "Neutral" based on valuation [1][15]. Core Insights - CATL's 2Q25 earnings exceeded expectations, with revenue of Rmb94 billion, an 8% year-over-year growth, and a net profit of Rmb16.5 billion, up 34% year-over-year [1][17]. - The battery unit gross profit (GP) showed mixed results, with a blended unit GP of Rmb135/kWh, slightly lower than Rmb136/kWh in 1Q25, indicating domestic market pressures [2][17]. - The report anticipates that the domestic EV battery unit GP will bottom out in 2026, a shift from the previous expectation of 2025 [2][29]. Financial Performance - CATL's 2Q25 results included a sales volume of approximately 150 GWh, a 34% increase year-over-year, but 5% below expectations [1][17]. - The company's total gross profit for 2Q25 was Rmb24 billion, missing estimates by Rmb2.3 billion, but offset by stronger financial gains and operating expense savings [1][17]. - The report revises earnings forecasts for 2025-2027 down by 1%, 5%, and 3% respectively, primarily due to lower battery unit GP assumptions [15][29]. Market Position and Strategy - CATL's capital expenditure (CAPEX) is expected to rise from 13% in 2024 to 24% in 2025, supporting market share gains [15][29]. - The company is leading in R&D for all-solid-state battery products, with small-scale production expected by 2027, although commercialization is still a few years away [15][29]. - The report highlights the installation of new battery technologies, including fast-charging LFP batteries and sodium-ion batteries, in the upcoming quarters [15][29]. Valuation Metrics - The 12-month price target for CATL's A-Shares is set at Rmb328, reflecting an 18.4% upside from the current price of Rmb277.09 [1][15]. - For H-Shares, the price target is raised to HK$436, indicating a 2.2% upside from the current price of HK$426.60 [1][15]. - The report provides various financial ratios, including a projected P/E ratio of 17.4 for 2024 and a dividend yield of 2.9% [4][9].

Investment Rating - The report assigns an "Overweight" rating to Pop Mart International Group with a price target of HK$365.00, indicating a potential upside of 39% from the current price of HK$263.20 [6]. Core Insights - Pop Mart's 1H25 sales and earnings exceeded estimates by 8% and 20%, respectively, with Greater China and APAC identified as key markets driving this performance [1][2]. - The company is expected to continue strong sales growth, with estimates of 150-160% growth in 3Q25, following a 230% increase in 2Q25 [3]. - The report highlights significant operational efficiencies, with a notable decline in the SG&A ratio due to economies of scale and effective spending management [2][4]. Financial Performance - For 1H25, Pop Mart reported sales of RMB 13.7 billion, a 200% increase year-over-year, and a net profit of RMB 4,375 million, reflecting a 375% increase [2]. - The gross profit margin (GPM) improved to 70.9%, up 6.8 percentage points, while the operating profit margin (OPM) reached 41.1%, an increase of 16.7 percentage points [2]. - The report forecasts revenue growth of 140% and 210% for 2025, with adjusted net profit margins projected at 31.6%, 32.5%, and 32.9% for 2025, 2026, and 2027, respectively [4][11]. Estimate Revisions - Revenue forecasts for 2025, 2026, and 2027 have been increased by 19%, 22%, and 23%, respectively, due to stronger-than-expected performance in both domestic and international markets [9]. - Gross profit margin assumptions have been raised by 2.6 percentage points for 2025, reflecting increased pricing strategies in the US market [10]. - The SG&A ratio is expected to decrease to 29.9%, 29.3%, and 29.2% for 2025, 2026, and 2027, respectively, indicating improved operational leverage [11]. Valuation - The base case scenario for the price target has been raised to HK$365, reflecting a revised EPS forecast for 2025, with a target P/E ratio of 46x [24]. - The bull case scenario suggests a price target of HK$482, driven by stronger domestic and overseas momentum [25]. - The bear case scenario indicates a price target of HK$161, contingent on unfavorable macroeconomic conditions [25].

Investment Rating - The report maintains a Neutral rating on Pop Mart (9992.HK) with a 12-month target price of HK$260.00, reflecting a downside of 1.2% from the current price of HK$263.20 [10][19]. Core Insights - Pop Mart's 1H25 profit alert indicates a sales increase of no less than 200% year-on-year, translating to at least Rmb13.7 billion in revenue, surpassing Goldman Sachs' estimate of 187% growth [1][15]. - The group profit is expected to rise by no less than 350% year-on-year, suggesting a net profit of Rmb4.5 billion in 1H25, which is above the previous estimate of Rmb3.8 billion [1][15]. - The robust performance is attributed to strong IP popularity, particularly the Labubu IP, and significant growth in both mainland China and overseas markets [2][3]. Financial Forecasts - Revenue projections for Pop Mart have been revised upwards for 2025-2027, with expected revenues of Rmb32.8 billion in 2025, Rmb42.3 billion in 2026, and Rmb49.1 billion in 2027, reflecting growth rates of 152%, 29%, and 16% respectively [5][16]. - The adjusted net profit for 2025 is forecasted at Rmb10 billion, indicating a growth of 213% [16]. - The report highlights a significant EBITDA growth forecast, with expected figures of Rmb14.8 billion in 2025 and Rmb22.7 billion in 2027 [5][10]. Market Performance - Pop Mart's stock has shown substantial price performance, with an absolute increase of 588.1% over the past 12 months [11]. - The company has a market capitalization of HK$350.6 billion and an enterprise value of HK$336.7 billion [5]. Growth and Margins - The report indicates a notable expansion in net profit margin (NPM), expected to reach around 30% in 1H25, compared to 20% in 1H24 and 26% in 2H24 [1][3]. - The EBITDA margin is projected to improve to 45.1% in 2025, with continued growth in subsequent years [10][13]. Strategic Outlook - The report emphasizes the importance of extending IP popularity beyond Labubu and expanding the product category to maintain growth momentum [3][20]. - The potential for further customer base expansion is highlighted as a key driver for future earnings growth [3][20].

Investment Rating - The report maintains a "Buy" rating for Giant Biogene Holding (2367.HK) with a 12-month price target of HK$71.00, indicating a potential upside of 25.1% from the current price of HK$56.75 [1][15][34]. Core Insights - Giant Biogene is expected to achieve a year-on-year sales growth of 23% to RMB3,116 million and a net income growth of 20% to RMB1,183 million for 1H25, with an adjusted net profit of RMB1,205 million, reflecting a 17% increase year-on-year when excluding ESOP expenses [1][18][20]. - The company is positioned to benefit from the upcycle in China's functional skincare market, leveraging its strengths in recombinant collagen and expanding its online presence through key brands Comfy and Collgene [37][38]. Summary by Sections Financial Performance - Revenue forecasts for 2025-2027 have been revised upwards by 0-2% due to more resilient margins and faster sales recovery than previously estimated [15][34]. - The expected gross profit margin (GPM), operating profit margin (OPM), and net profit margin (NPM) for 1H25 are projected at 81.7%, 41.3%, and 38.0% respectively [25][26]. Market Trends - Online gross merchandise volume (GMV) has shown a recovery trajectory, increasing by 58% year-on-year on Douyin as of July, significantly outperforming peers [2][31]. - The report highlights a minimal contribution from KOL livestreaming, which accounted for approximately 10% of sales on Douyin in July, down from 20% in the same period last year [2]. Brand Performance - The Comfy brand is anticipated to deliver 21% growth in online sales and 16% growth in offline sales for 1H25, while the Collgene brand is expected to grow by 70% online but decline by 5% offline [23][28]. - The report emphasizes the company's strategies to revitalize brand momentum, particularly in preparation for the Double 11 shopping festival [2].

Investment Rating - The report maintains a Neutral rating for Haidilao International Holding with a 12-month price target of HK$15.30, implying an upside potential of 8.4% from the current price of HK$14.12 [1][2][26]. Core Insights - The earnings forecasts for Haidilao have been revised down by 13%-16% for 2025-27, primarily due to lower-than-expected performance in 1H25, slower store expansion, and the company's strategy to offer better value to customers [2][23][27]. - The company is expected to experience a revenue decline of 4% year-on-year in 1H25, driven by weaker table turn performance and a decrease in party size, although a slight improvement in average selling price (ASP) may provide some offset [20][21]. - Despite the challenges in 1H25, the second half is anticipated to show a recovery in same-store sales growth (SSSG) due to an easier comparison base, which could lead to slight positive growth in average sales per store [2][22]. Summary by Sections Earnings Forecasts - The report projects a revenue of Rmb20.6 billion for 1H25, reflecting a 4% decline year-on-year, with restaurant revenue expected to drop by 6% [20][21]. - For 2025, total revenue is estimated at Rmb43.09 billion, down from the previous estimate of Rmb44.62 billion, marking a 3.4% reduction [25]. Margin Analysis - The gross profit margin (GPM) is expected to contract to 60.7% in 1H25, down from 61.0% in 1H24, due to increased food cost ratios and operating deleverage [1][21]. - Operating profit margin (OPM) is projected to decrease by 0.8 percentage points year-on-year to 11.8% [21]. Store Expansion and Performance - The company is expected to close 8 net stores in 1H25, indicating a cautious approach to expansion amid fluid consumption trends [20]. - The total store count for Haidilao is projected to decrease by 30 stores in 2025, with a total of 1,415 stores expected [25]. Valuation Metrics - The report provides a valuation of 16X for the 2025 estimated price-to-earnings (P/E) ratio, with a projected dividend yield of 6% [2][13]. - The adjusted EBITDA for 2025 is forecasted at Rmb8,063.4 million, reflecting a decline from previous estimates [25]. Key Focus Areas for Investors - Investors are advised to monitor the trends in table turn performance, store expansion plans, margin outlook, and the impact of delivery subsidies on overall performance [22][23].